Detailed Rationale

Crisil Ratings has continued its ratings on the bank facilities of Jindal Poly Films Ltd (JPFL) on ‘Rating Watch with Negative Implications’.

 

During the first quarter of fiscal 2026, the manufacturing capacity of JPFL Films, which stood at ~695,000 tonne per annum (TPA; including biaxially oriented polyethylene terephthalate [BOPET], biaxially oriented polypropylene [BOPP] and other capacities), declined to approximately 25% of its total capacity due to a fire accident at JPFL's Nashik plant on May 21, 2025. This incident has impacted the business risk profile. The plant was fully shut down for approximately 20 days due to the impact of the fire and has resumed operations from June 9, 2025, with the unaffected capacity. While restoration work for the impacted capacities has commenced, completion within timelines committed earlier, without any major time overruns, remains monitorable. As indicated by the management, one BOPET line commenced operations in the third quarter of fiscal 2025 and one capacitor line is in advanced stage of operationalisation and is expected to start by the fourth quarter of fiscal 2026. The holding company, that is JPFL, is yet to declare the financial results for the second quarter of the current fiscal.

 

Although the damage to the factory and plant machinery due to the fire is covered under insurance, as per the management, the loss of profit due to the shutdown of the plant is not covered in the current insurance policy and will have to be borne by the company. JPFL has already infused funds in the form of unsecured loan of ~Rs 700 crore in JPFL Films since the fire till November 30, 2025, to meet its working capital and debt obligation. The management has stated that it will continue to support JPFL Films and ensure that all debt obligation are completed in a timely manner.

 

Subsequently, investigation has been initiated by Enforcement Directorate (ED) in September 2025 on BC Jindal Group entities (including JPFL) for suspected Foreign Exchange Management Act (FEMA) violations. The management has informed that certain banking restrictions which were placed on group entities which have since been removed and no further queries or any action has been taken by ED. However, the investigation may lead to possible lender delays in evaluation of the company’s debt proposal for restoration of capacities that were impacted by a fire incident in May 2025. The bank loan sanctions are currently under process and will be monitorable going forward.

 

Crisil Ratings has taken note of recent news articles mentioning intervention affidavit filed by the Securities and Exchange Board of India (SEBI) with the National Company Law Tribunal (NCLT) along with its preliminary findings in the last week of November 2025 related to class action suit filed by minority shareholders against JPFL. The management has informed that it has not received any orders or any formal communication from SEBI regarding any investigation or any alleged securities law violations.

 

The management has also re-iterated that the group has adhered to the applicable legal and regulatory requirements and is cooperating with the authorities for timely resolution of regulatory investigations. The operations of the company, including existing banking limits, remain unaffected.

 

Crisil Ratings will continue to engage with the management and will resolve the negative watch considering the company’s ability to restore and ramp up its capacity as per the plan given. Also, any adverse impact on the company or its promoter group arising from the ongoing investigations remains monitorable, posing a downside risk to the outstanding credit ratings.

 

The financial risk profile is expected to be subdued in the coming fiscals. With depletion in networth because of loss due to fire, the capital structure is expected to decline with debt to earnings before interest, tax, depreciation and amortisation (Ebitda) ratio expected to increase to 14-15 times in fiscal 2026 (from 8.4 times in fiscal 2025), impacted further by expected demerger. Interest coverage ratio is expected to decline given the impact on net cash accrual (NCA) during the year. However, it remains supported by a strong liquidity profile, with cash and equivalent of over Rs 4,000 crore as on June 30, 2025. The management has articulated that they will support continuation of operations in JPFL Films and will infuse funds to ensure timely repayment of interest and debt obligation.

 

JPFL, on August 14, 2025, had also announced the de-merger of its Global Non-Woven (GnL) business from the JPFL group into Global Nonwovens Ltd (which is currently a 100% subsidiary of JPFL). GnL will be subsequently de-merged from JPFL and be listed on the stock exchanges with shareholding mirroring that of JPFL. The entire process is expected to be completed within the next 9-12 months. The proposed de-merger is being undertaken to facilitate the growth and expansion of the GnL business segment separately. This will result in transfer of assets worth ~Rs 1,500 crore along with outstanding debt of ~Rs 650 crore. The impact on the business risk profile is expected to be limited as GnL accounts for ~13% of revenue as on March 31, 2025. Furthermore, the demerger is not expected to impact the financial risk profile of JPFL as liquidity of ~Rs 4,000 crore will continue in the existing company while consolidated debt is expected to decline after the demerger.

 

The ratings continue to draw strength from experienced management and liquidity profile of the group. These strengths are partially offset by loss of market share in packaging, demerger of GnL division, vulnerability to volatility in raw material prices, and demand-supply dynamics coupled with any potential financial or legal implication on the company on account of investigation by regulatory authorities.

Analytical Approach

To arrive at its ratings, Crisil Ratings has combined the business and financial risk profiles of JPFL and its subsidiaries, citing managerial, operational, and financial linkages between the entities. The company will retain the majority shareholding in JPFL Films, and strong management linkages and shared name will ensure fungibility of funds between JPFL and JPFL Films.

 

Please refer Annexure - List of Entities Consolidated, which captures the list of entities considered and their analytical treatment of consolidation.

Key Rating Drivers - Strengths 

Strong liquidity profile:

The financial risk profile is currently supported by cash and equivalent of Rs 4,000 crore (as on June 30, 2025) at JPFL’s level, majorly deployed over mutual funds, debt and equity investments. With the impact on accrual during fiscal 2026, the debt obligation and working capital requirement are expected to be supported by strong liquidity. JPFL has infused ~Rs 700 crore till date in JPFL Films in the form unsecured loans to support its operations since the fire accident.

 

With the demerger, liquidity will be retained in the group with the exception of around Rs 100 crore, which will be split along with separation of the GnL division.

Key Rating Drivers - Weaknesses 

Weakening of market position due to the breakout of fire:

JPFL group was the largest flexible packaging player in India – the packaging business which has been placed under JPFL Films. JPFL Films had BOPET capacities of 173,000 TPA, BOPP capacities of 294,000 TPA, capacitor film capacity of 5,000 TPA, BOPA Nylon Capacity of 5,000 TPA. However, currently ~97,000 TPA of BOPET, 5,000 TPA capacitor, 5,000 TPA BOPA Nylon remain operational after the fire. The recovery in operational capacity remains monitorable.

 

Vulnerability to volatility in raw material cost, demand-supply dynamics and cyclicality in the BOPP and BOPET segments:

The BOPP and BOPET businesses are cyclical in nature. Product realisations have fluctuated in the past depending on the demand-supply gap. Also, the players tend to add large capacities when prices improve, leading to a fall in product realisations. The last four fiscals saw a huge fluctuation in margin due to a surge in demand and supply. The Ebitda margin, which was 12-13% historically, rose to 23.6% in fiscal 2021 and 24.2% in fiscal 2022, backed by healthy realisations across product segments. Due to capacity addition in the industry in fiscal 2023 leading to oversupply and correction in product prices, the Ebitda margin declined to 9.7% in fiscal 2023 and to negative 0.1% in fiscal 2024. Fiscal 2025 has shown stabilisation in demand and supply scenario which led to a sequential improvement in Ebitda margin during fiscal 2025. Improvement in supply-demand dynamics and prices of BOPET and BOPP will remain monitorable going forward. The Ebitda margin during fiscal 2026 is expected to be impacted owing to the fire and limited operations.

 

Operating efficiency constrained by demand and supply imbalance:

The imbalance in demand and supply has impacted all packaging players across the industry in the last few fiscals. Despite JPFL having the single largest facility in Nashik, operating margins have been impacted more as compared to few of its peers due to large share of commoditised products in the product profile.

 

However, the company has been adding value-added products to the product portfolio in the last two years. JPFL added self-adhesive labels and capacitor films in 2022, and BOPA Nylon Films in September 2024. Value-added products help shield operating profitability during commodity price fluctuations. With the addition of the above products, the share of value-added products is expected to improve going forward. The ability of these other businesses/value-added products to support businesses during the current year will remain monitorable.

Liquidity Strong

Liquidity remains robust marked by cash and liquid investments of around Rs 4,000 crore as on June 30, 2025, on a consolidated basis. The working capital limit of over Rs 1,600 crore remained unaffected during the ED investigation, and was utilised at around 35% on an average over the six months through August 2025. With inventory losses, the drawing power of the company will be monitorable in the coming fiscals. The net cash accrual is likely to be negative during fiscal 2026 due to damage caused by the fire; however, strong liquidity in the form of investments should suffice to meet the debt obligation and working capital requirement during the period.

ESG Profile

The ESG profile of JPFL supports its strong credit risk profile

 Flexible packaging manufacturers have a high impact on the environment, primarily driven by high power consumption during the manufacturing process. The sector also has a significant social impact as it has a large workforce deployed under its own operations and its value chain partners, and given the nature of operations, which impacts the local community and may involve health hazards. JPFL has been focusing on mitigating its environmental and social risks.

 

Key ESG highlights:

• ESG disclosures of the company are evolving; and it is in the process of strengthening them, going forward.
• The company has taken various steps to maximise energy conservation; these include the increased usage of solar panels, LED lights, air compressors, turbo ventilators, energy efficient pumps, and installation of energy efficient fans, motion sensors and plant ambient temperature monitoring systems, optimisation of air cooling and pumping system operation sequence.
• The gender diversity has improved with the percentage of women rising from 13.9% in fiscal 2023 to 16% in fiscal 2024.
• The governance structure is characterised by 33% independent directors on the board, effectiveness in board functioning and enhancing shareholder wealth, presence of investor grievance redressal mechanism and extensive financial disclosures.

 

There is growing importance of ESG among investors and lenders. JPFL’s commitment will play a key role in enhancing stakeholder confidence, given the shareholding by foreign portfolio investors and access to both domestic and foreign capital markets.

Rating sensitivity factors

Upward factors

• Increase in operational capacity at the packaging division, leading to substantial revenue growth and better operating profitability with Ebitda margin improving to over 10%
• Improvement in financial risk profile, driven by increasing cushion between net cash accrual and repayment obligation, and sustenance of a healthy liquidity position

 

Downward factors

• Inability to restore capacities impacted by the fire incident, leading to a sustained drop in scale of operations and Ebitda margin less than 6-7%
• Weakening of financial risk profile due to under-recovery or delay in insurance receipts, depletion in liquidity or debt-funded capital expenditure or acquisition plans
• Any material implication arising out of ED investigation or any other regulatory action, on the credit risk profile of the company
• Material deviation from understanding of the management, operating and financial linkages with JPFL Films, which may warrant a review of the analytical approach

About the Company

JPFL, a part of the BC Jindal group, was incorporated in 1974 to manufacture polyster yarn (POY). In 1996, the company diversified into packaging films by manufacturing BOPET. It stopped manufacturing POY in fiscal 2006 to focus on the packaging films division. It now manufactures polyester chips and the complete range of packaging films comprising BOPET, BOPP and non-woven fabrics. JPFL had capacities of 173,000 TPA and 294,000 TPA for BOPET and BOPP, respectively, but it was partially damaged due to the fire.

 

In February 2014, it acquired 60.45% stake in GNL and increased the stake to 100% in fiscal 2017. GNL has a unit at Nashik with capacity of 58,000 TPA of non-woven products for hygiene and medical applications and has a reputed customer base. As per an announcement as on August 14, 2025, the GnL division is expected to be demerged from the group in the next 9-12 months.

 

During August 2022, the company de-merged its packaging division to its subsidiary JPFL Films. This subsidiary is to be jointly held by JPFL and Brookfield SPV.

Any other information: Not applicable